You Can Undo A Social Security Benefits Claiming Decision
There aren’t many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Let’s say you claimed your benefit, but regretted the decision and wished you had waited. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount youll earn by waiting.
Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.
Adding It All Together
- SSA Online Calculator: This simplified calculator will give you a rough estimate of your possible Social Security benefits.
- SSA Detailed Calculator: This calculator asks for more detail, so it gives you a better estimate of your Social Security benefits.
- SSA Retirement Estimator: If you have enough credits to receive Social Security, you haven’t applied for benefits, and you aren’t receiving benefits, you can use this calculator. It automatically inputs your earnings and other information using your Social Security records.
- Retirement Benefit Sheet: This fact sheet from the SSA includes a worksheet that you can fill out to estimate your benefit on your own. If you want to do the math on your own so you’re more familiar with how the formula works, this is the place to do it.
Social Security Money Stolen By Government
note: The theft of SS funds has been ongoing since President Johnson took the fund out of trust and put it into the general fund to help finance the Viet Nam War. The Bush2 Administration used SS funds to hide the loss of revenue from his tax cuts the upper 3% redesignating these stolen funds as revenues to hide the theft.
Guest columnistPublished: Saturday, July 10, 2010 at 4:01 a.m. NewsChief.com
The 1983 payroll tax hike has generated more than $2.5 trillion that is supposed to be in the trust fund
Is There A Maximum Benefit
Yes, there is a limit to how much you can receive in Social Security benefits. The maximum Social Security benefit changes each year. For 2021, itâs $3,895/month for those who retire at age 70 . Multiply that by 12 to get $46,740 in maximum annual benefits. If that’s less than your anticipated annual expenses, youâll need to have additional income from your own savings to supplement it.
Ways To Balance Social Securitys Budget
Even though Social Security isnt expected to run out of money for 15 years, several options for changes have already been floated to deal with the budget shortfall. These options include:
- Raising the payroll tax rate
- Increasing the wages subject to Social Security taxes
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Restrictions On Potentially Deceptive Communications
Because of the importance of Social Security to millions of Americans, many direct-mail marketers packaged their mailings to resemble official communications from the Social Security Administration, hoping recipients would be more likely to open them. In response, Congress amended the Social Security Act in 1988 to prohibit the private use of the phrase “Social Security” and several related terms in any way that would convey a false impression of approval from the Social Security Administration. The constitutionality of this law was upheld in United Seniors Association, Inc. v. Social Security Administration, 423 F.3d 397 , cert den 547 U.S. 1162 126 S.Ct. 2346 .
How Workers Can Get Estimates Of Benefits
The Social Security Administration provides benefit estimates to workers through the Social Security Statement. The Statement can be accessed online by opening an online account with SSA called my Social Security. With that account, workers can also construct “what if” scenarios, helping them to understand the effect on monthly benefits if they work additional years or delay the start of retirement benefits. The my Social Security account also offers other services, allowing individuals to request a replacement Social Security card or check the status of an application.
A printed copy of the Social Security Statement is mailed to workers age 60 or older.
In 2021, SSA began producing Retirement Ready fact sheets, available online and as part of the online Statement, that tailor retirement planning information to different age groups .
SSA also has a Benefits Calculators web page with several stand-alone online calculators that help individuals estimate their benefits and prepare for retirement. These include benefit calculators for spouses, calculators for persons affected by the Windfall Elimination Provision or the Government Pension Offset and calculators to determine a person’s full retirement age or the effect of the earnings test on benefits.
SSA also provides a life expectancy calculator to help with retirement planning.
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Total Benefits Paid By Year
Workers in Social Security covered employment pay FICA or SECA taxes and earn quarters of coverage if earnings are above minimum amounts specified in the law. Workers with 40 quarters of coverage are “fully insured” and eligible for retirement benefits. Retirement benefit amounts depend upon the average of the person’s highest 35 years of “adjusted” or “indexed” earnings. A person’s payroll-taxable earnings from earlier years are adjusted for economy-wide wage growth, using the national average wage index , and then averaged. If the worker has fewer than 35 years of covered earnings these non-contributory years are assigned zero earnings. The sum of the highest 35 years of adjusted or indexed earnings divided by 420 produces a person’s Average Indexed Monthly Earnings or AIME.
The AIME is then used to calculate the Primary Insurance Amount or PIA. For workers who turn 62 in 2021, the PIA computation formula is:
90 percent of the first $996 of average indexed monthly earnings, plus
32 percent of average indexed monthly earnings between $996 and $6,002, plus
15 percent of average indexed monthly earnings over $6,002
Monthly benefit amounts are based on the PIA. Once the PIA is computed, it is indexed for price inflation over time. Thus, Social Security monthly benefit amounts retain their purchasing power throughout a person’s retirement years.
How Much Can I Get In Lifetime Benefits If I Wait
The increase in monthly benefits associated with delayed retirement credits can result in your collecting more in total lifetime Social Security income, if you live long enough. Social Security is designed to pay out the same amount in total lifetime benefits regardless of what age you claim, but it uses average life-expectancy tables in its calculations, so people with longevity on their side can collect more in benefits over time.
To illustrate how, let’s consider how life expectancy might affect total lifetime benefits for Jim. In our previous example, Jim can collect $750 per month if he claims at age 62, $1,000 per month if he claims at 66 , or $1,320 per month at 70.
Therefore, if Jim lives until 75, his total in lifetime benefits from claiming at either 62, 66, or 70 would be $126,000, $120,000, or $95,040, respectively. In this scenario, waiting to claim wouldn’t pay off for Jim. If Jim dies at 80, his lifetime income from Social Security at these ages would be $171,000, $180,000, and $174,240. At this point, waiting is beginning to pay off for Jim. Now, if Jim were to live until 90 years old, his lifetime haul from Social Security would be $261,000, $300,000, or $332,640 if he claimed at 62, 66, or 70, respectively. Clearly, delaying benefits until 70 years old really pays off in this final scenario.
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If You’re Not Sure Why You Received A Payment
If you receive a check or direct deposit payment from the Treasury Department and do not know what its for, contact the regional financial center that issued it.
If you received a check, look for the RFCs city and state at the top center. Then contact that RFC to find out which federal agency authorized the payment. It will be one of these:
If you received payment byelectronic funds transfer , or direct deposit, follow the directions under Find Information About a Payment.
Use the Treasury Check Verification System to verify that the check is legitimate and issued by the government.
Why Do You Need To Earn So Much To Max Out Your Social Security Benefits
To understand why your earnings must be so high in order to get the maximum benefit, let’s take a step back and look at how Social Security benefits are calculated. Here’s how the formula works:
- Social Security calculates your average wages in the 35 years your earnings were the highest .
- Your benefits equal a percentage of your average wages in those 35 years.
That’s why your earnings need to equal or exceed the wage base limit for a full 35 years or longer. If they don’t, you’ll have an average wage that’s below the maximum, and your benefits will be below it as well.
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Reduction For Disability Payments From Other Sources
If you receive disability benefits from a private source, like a private pension or private insurance benefits, these benefits will not affect your SSDI benefits. If, however, you receive other public disability benefits, they may affect your SSDI benefits. For instance, if you were injured on the job and are receiving workers’ compensation benefits, the amount of SSDI benefits you receive might be reduced.
Other disability benefits that are not job-related and are paid for by the federal, state, or local government may also reduce your SSDI benefit amount. Examples of these include temporary disability benefits paid by the state, military disability benefits, and state or local government retirement benefits that are based on disability. Some public benefits are not counted toward the 80%, including SSI or VA benefits.
The combined total amounts you receive from SSDI and all other public disability benefits cannot be more than 80% of the average amount you earned before you became disabled. If the amount is more than 80% of what your average earnings were before you became disabled, in most states, the excess amount is deducted from your SSDI benefits.
The interaction between workers’ compensation and SSDI can be complicated and varies depending on what state you live in. If you qualify for more than one public disability benefit, you may want to speak with an attorney to make sure you do not miss out on any benefits you are entitled to.
How Updating A 135
To this we say, weelllll, not really. The situation is more complicated than that.
Its true that workers fork over Social Security and Medicare taxes every payday. But under current law, over their lifetimes most Americans will get back substantially more from these programs then theyve paid in, even after accounting for inflation and adjusting for interest you might have earned if youd kept the money.
Thats primarily due to the rising value of projected Medicare health benefits. Social Security is a different story. In recent years the raising of the Social Security retirement age, plus other tweaks, have made the big retirement income entitlement less generous. New retirees wont get back quite as much income support as theyve contributed in Social Security taxes.
However, individual tax/benefit ratios for both programs are highly variable, depending on lifetime earnings, longevity, marital status, and health conditions.
Got all that? We werent kidding when we said it was complicated.
Numbers might better illustrate these points. At the Urban Institute, C. Eugene Steuerle and Caleb Quakenbush have been studying these issues for some time. According to their updated 2012 figures, a single male earning the average wage who retired in 2010 will receive total lifetime Social Security and Medicare benefits worth $457,000, following total lifetime tax contributions of $361,000. So hell be $96,000 in the black.
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Claim That It Is A Ponzi Scheme
Critics have drawn parallels between Social Security and Ponzi schemes, arguing that the sustenance of Social Security is due to continuous contributions over time. One criticism of the analogy is that while Ponzi schemes and Social Security have similar structures , they have different transparencies. In the case of a Ponzi scheme, the fact that there is no return-generating mechanism other than contributions from new entrants is obscured whereas Social Security payouts have always been openly underwritten by incoming tax revenue and the interest on the Treasury bonds held by or for the Social Security system. The sudden loss of confidence resulting in a collapse of a conventional Ponzi scheme when the scheme’s true nature is revealed is unlikely to occur in the case of the Social Security system. Private sector Ponzi schemes are also vulnerable to collapse because they cannot compel new entrants, whereas participation in the Social Security program is a condition for joining the U.S. labor force. In connection with these and other issues, Robert E. Wright calls Social Security a “quasi” pyramid scheme in his book, Fubarnomics.
Theres An Annual Social Security Cost
One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is quite valuable its the equivalent of buying inflation protection on a private annuity, which can get expensive.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries saw a 1.3% COLA in their monthly Social Security benefits.
The Kiplinger Letter predicted in September that the COLA for 2022 could be 6%, which would be the largest adjustment since 1982. The final COLA for 2022 will be announced on Oct. 13.
Heres what COLAs have been in other recent years:
- 2009: 5.8%
- 2021: 1.3%
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Get Ssa Benefits While Living Overseas
U.S. citizens can travel to or live in most, but not all, foreign countries and still receive their Social Security benefits. You can find out if you can receive benefits overseas by using the Social Security Administrations payment verification tool. Once you access the tool, pick the country you’re visiting or living in from the drop-down menu options.
Transition Costs And Apples
The most fundamental reason that one cannot compare the rate of return on Social Security to the rate of return in the private market is that one cannot secure private-market returns via private accounts without incurring heavy transition costs. Comparisons of the returns on Social Security to the returns in capital markets that ignore these transition costs are not valid. They represent apples-to-oranges comparisons.
From the date it first began paying benefits, Social Security has been a pay-as-you-go system. Current payroll taxes are largely used to pay for current beneficiaries. If some of these taxes are redirected into private accounts, some other revenue source is needed to pay current beneficiaries. This is the transition cost.
This point was forcefully made by economists John Geanakopolos, Olivia Mitchell and Stephen Zeldes. Their analysis concludes:
If projected returns on Social Security are significantly lower than those offered in U.S. capital markets, doesnt it immediately follow that we would all be better off if we were allowed to invest Social Security contributions directly in private securities? Frequent arguments in the popular press and some studies by advocates of privatization suggest that this is the case. Yet, this conclusion is misleading for two reasons: it ignores transition costs and it does not account for changes in risk borne by participants.
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Tax On Wages And Self
Benefits are funded by taxes imposed on wages of employees and self-employed persons. As explained below, in the case of employment, the employer and employee are each responsible for one half of the Social Security tax, with the employee’s half being withheld from the employee’s pay check. In the case of self-employed persons , the self-employed person is responsible for the entire amount of Social Security tax.
The portion of taxes collected from the employee for Social Security are referred to as “trust fund taxes” and the employer is required to remit them to the government. These taxes take priority over everything, and represent the only debts of a corporation or LLC that can impose personal liability upon its officers or managers. A sole proprietor and officers of a corporation and managers of an LLC can be held personally liable for non-payment of the income tax and social security taxes whether or not actually collected from the employee.
A separate payroll tax of 1.45% of an employee’s income is paid directly by the employer, and an additional 1.45% deducted from the employee’s paycheck, yielding a total tax rate of 2.90%. There is no maximum limit on this portion of the tax. This portion of the tax is used to fund the Medicare program, which is primarily responsible for providing health benefits to retirees.
The Social Security tax rates from 1937â2010 can be accessed on the Social Security Administration‘s website.
Wages not subject to tax